On this day in 1883, the great economist John Maynard Keynes was born. Last year, I spent most of the time complaining about how this depression we are still in was in no fundamental sense different from the Great Depression, yet policy makers were determined to ignore everything we learned from Keynes. I noted that things weren’t nearly as bad because we had automatic policy like Social Security and unemployment. But I have little doubt that if we didn’t have those stabilizers, the economic conservatives still would have decided to do nothing to help the people. As it was, conservatives have done everything they could to undermine the social safety net at exactly the time when we need it most.
It would have been one thing if in 1999, when the economy was booming and anyone who wanted a job could have a job, Paul Ryan had made his comment about the social safety net lulling able body people into life of complacency. But we have been getting this rhetoric (And worse!) during a period when our employment to population ratio is five percentage points less than it was during most of the Bush the Younger years.
I have begun to think that maybe Keynes wasn’t such an original thinker. Sure, he was brilliant and all. But economics has pretty much always been a handmaiden of policy makers and so economists have always tended to tell the power elite what they wanted to hear. That’s one of the reasons that Marx is so vilified. And Keynes isn’t far behind him in vilification, despite the fact that economically speaking they are on opposite poles. But just like Marx, Keynes told the power elite things they didn’t and still don’t want to hear.
Where Keynes’ brilliance laid (and that of most geniuses) was in seeing things clearly rather than through a veil of established wisdom. His important work all seems to be based upon the paradox of thrift. That was an idea that was very old. Adam Smith wrote, “What is prudence in the conduct of every private family can scarce be folly in that of a great Kingdom.” But it was Keynes who grabbed onto it and showed how it explained depressions.
But even after the Great Depression and the clearest demonstration that Keynes was right, we find ourselves in the same situation. The same disproved theories that were used during the Great Depression to justify the government doing little or nothing were brought out during this depression for the same purpose. Of course, they were given need clothes. There was Reinhart-Rogoff with their 90% debt cutoff that was bogus. There was Alesina-Ardagna with their expansionary austerity that was bogus. And now, we are left with Keynes and only Keynes.
And what do we do? Nothing. Because doing nothing was always the plan of the policy makers—the power elite. They don’t see economics as a science that can make the running of the economy better. They see it as a form of apologetics to be used to justify whatever policy they prefer. So when R-R and A-A went down in flames, it didn’t matter. They were just objects to be held up to the masses to justify policies that enrich the rich and impoverish the poor. Those policies were given, it was just nice to have their little stable of kept economists who will twist their data and models to justify those policies. When they can’t do it, the kept economists are sent away like court jesters who have begun being tiresome.
Meanwhile, Keynes was right. And that matters in the intellectual history of humanity. But it doesn’t matter at all when it comes to the policies that economic conservatives put forward.
Happy birthday John Maynard Keynes!